<PAGE>
BURNS INTERNATIONAL SERVICES CORPORATION
200 SOUTH MICHIGAN AVENUE
CHICAGO, IL 60604
INFORMATION STATEMENT PURSUANT TO
SECTION 14(f) OF THE SECURITIES EXCHANGE
ACT OF 1934 AND RULE 14f-1 THEREUNDER
This Information Statement is being mailed on or about August 7, 2000 as
part of the Solicitation/Recommendation Statement on Schedule 14D-9 (the
"Schedule 14D-9") of Burns International Services Corporation (the "Company").
You are receiving this Information Statement in connection with the possible
election of persons designated by Securitas AB, a joint stock company organized
under the laws of Sweden ("Parent"), to a majority of the seats on the Board of
Directors (the "Board of Directors" or the "Board") of the Company. On August
3, 2000, the Company entered into an Agreement and Plan of Merger (the "Merger
Agreement") with Parent and Securitas Acquisition Corporation (the
"Purchaser"), a Delaware corporation and an indirect wholly-owned subsidiary of
Parent, pursuant to which Purchaser is required to commence a tender offer to
purchase all of the outstanding shares of common stock, par value $0.01 per
share, of the Company (the "Common Stock"), including the associated preferred
stock purchase rights (the shares of Common Stock and any associated preferred
stock purchase rights are referred to in this Information Statement as the
"Shares"), at a price per Share of $21.50, net to the seller in cash, upon the
terms and conditions set forth in Purchaser's Offer to Purchase dated August 7,
2000 and in the related Letter of Transmittal (which, together with any
amendments and supplements thereto, collectively constitute the "Offer").
Copies of the Offer to Purchase and the Letter of Transmittal have been mailed
to stockholders of the Company and are filed as Exhibits (a)(1) and (a)(2),
respectively, to the Tender Offer Statement on Schedule TO (as amended from
time to time, the "Schedule TO") filed by Parent and Purchaser with the
Securities and Exchange Commission (the "Commission") on August 7, 2000. The
Merger Agreement provides that, subject to the satisfaction or waiver of
certain conditions, following completion of the Offer, and in accordance with
the General Corporation Law of the State of Delaware (the "DGCL"), Purchaser
will be merged with and into the Company (the "Merger"). Following consummation
of the Merger, the Company will continue as the surviving corporation and will
be a wholly-owned subsidiary of Parent. At the effective time of the Merger
(the "Effective Time"), each issued and outstanding Share (other than Shares
that are owned by Parent, Purchaser, any of their respective subsidiaries, the
Company or any of its subsidiaries, and Shares held by stockholders of the
Company who did not vote in favor of the Merger Agreement and who comply with
all of the relevant provisions of Section 262 of the DGCL) will be converted
into the right to receive $21.50 in cash or any greater amount per Share paid
pursuant to the Offer.
The Offer, the Merger, and the Merger Agreement are more fully described in
the Schedule 14D-9 to which this Information Statement forms Annex B, which was
filed by the Company with the Commission on August 7, 2000 and which is being
mailed to stockholders of the Company along with this Information Statement.
This Information Statement is being mailed to you in accordance with Section
14(f) of the Securities Exchange Act and Rule 14f-1 promulgated thereunder. The
information set forth herein supplements certain information set forth in the
Schedule 14D-9. Information set forth herein related to Parent, Purchaser or
the Parent Designees (as defined herein) has been provided by Parent. You are
urged to read this Information Statement carefully. You are not, however,
required to take any action in connection with the matters set forth herein.
Pursuant to the Merger Agreement, Purchaser commenced the Offer on August 7,
2000. The Offer is currently scheduled to expire at 12:00 midnight, New York
City time, on Friday, September 1, 2000, unless Purchaser extends it.
1
<PAGE>
General
The Common Stock is the only class of equity securities of the Company
outstanding which is entitled to vote at a meeting of the stockholders of the
Company. Each holder of a share of Common Stock is entitled to one vote per
share. As of the close of business on August 3, 2000, there were 19,948,884
shares of Common Stock outstanding.
Rights to Designate Directors and Parent Designees
The Merger Agreement provides that, promptly upon the purchase by Purchaser
of any of the Shares pursuant to the Offer, and from time to time thereafter as
Shares are acquired by Purchaser, Parent will be entitled to designate such
number of directors of good repute (the "Parent Designees"), rounded up to the
nearest whole number, on the Board of Directors as will give Parent, subject to
compliance with Section 14(f) of the Securities Exchange Act of 1934,
representation on the Board of Directors equal to the product of the total
number of directors currently on the Board multiplied by the percentage that
the aggregate number of Shares beneficially owned by Parent bears to the total
number of Shares then outstanding; provided, that Parent shall not be entitled
to designate a majority of the directors on the Board of Directors unless it
and its affiliates beneficially own a majority of the shares of Common Stock
outstanding.
The Merger Agreement provides that the Company will, upon request of Parent,
promptly increase the size of the Board of Directors or exercise its best
efforts to secure the resignations of such number of directors as is necessary
to enable the Parent Designees to be elected to the Board and will use its best
efforts to cause the Parent Designees to be so elected. At such time, the
Company will also cause (i) each committee of the Board, (ii) if requested by
Parent, the board of directors of each of the Company's subsidiaries, and (iii)
if requested by Parent, each committee of such board to include directors
designated by Parent constituting the same percentage of each such committee or
board as the Parent Designees constitute on the Board of Directors.
Notwithstanding the foregoing, in the event that Parent's designees are
appointed or elected to the Board of Directors, until the Effective Time, (i)
Mr. John Edwardson may continue to serve as a director and (ii) there will be
at least three members of the Board who were directors on the date of the
Merger Agreement and who are neither officers of the Company nor designees of
the Parent.
The Parent Designees will be selected by Parent from among the individuals
listed below. Each of the following individuals has consented to serve as a
director of the Company if appointed or elected. None of the Parent Designees
currently is a director of, or holds any position with, the Company. Parent has
advised the Company that, to the best of Parent's knowledge, except as set
forth below, none of the Parent Designees or any of their affiliates
beneficially owns any equity securities or rights to acquire any such
securities of the Company, nor has any such person been involved in any
transaction with the Company or any of its directors, executive officers or
affiliates that is required to be disclosed pursuant to the rules and
regulations of the Commission other than with respect to transactions between
Parent and the Company that have been described in the Schedule TO or the
Schedule 14D-9.
The name, birth year, present principal occupation or employment and five-
year employment history of each of the individuals who may be selected as
Parent Designees are set forth below. Unless otherwise indicated, each such
individual has held his or her present position as set forth below for the past
five years and each occupation refers to employment with Parent. Unless
otherwise indicated, each such person is a citizen of Sweden, and the business
address of each person listed below is c/o Securitas AB, Lindhagensplan 70,
P.O. Box 12307, SE-102 28 Stockholm, Sweden. The information contained in this
Information Statement concerning Parent Designees has been furnished to the
Company by Parent and its designees. Accordingly, the Company assumes no
responsibility for the accuracy or completeness of this information.
2
<PAGE>
Parent Designees
<TABLE>
<CAPTION>
Present Principal Occupation or Employment,
Birth Material
Name Year Positions Held During the Past Five Years
-------------------------- ----- ---------------------------------------------
<C> <C> <S>
Thomas F. Berglund........ 1952 Mr. Berglund has been President, Chief
Executive Officer and a member of the board
of directors of Parent since 1993. Mr.
Berglund has been President and a member of
the board of directors of Purchaser since
August 2000.
Hakan Winberg............. 1956 Mr. Winberg has been Executive Vice President
of Parent since 1995 and Chief Financial
Officer of Parent since 1985. Mr. Winberg has
been Executive Vice President and Chief
Financial Officer and a member of the board
of directors of Purchaser since August 2000.
Don W. Walker............. 1941 Mr. Walker, an American citizen, has been
Executive Vice President and a member of the
board of directors of Purchaser since August
2000. Mr. Walker has been Country Manager USA
for Parent since 1999, and is President of
Pinkerton Holdings, Inc. Prior to 1999, Mr.
Walker was Executive Vice President of
Pinkerton's Inc.
Mats Walstrom............. 1954 Mr. Walstrom has been Executive Vice
President of Parent since August 2000. Mr.
Walstrom was Executive Vice President of
Gambro AB and Chief Executive Officer and
President of Gambro Healthcare Inc. from 1993
to February 2000. Mr. Walstrom has been a
member of the board of directors of Purchaser
since August 2000.
Amund Skarholt............ 1948 Mr. Skarholt, a Norwegian citizen, has been
Executive Vice President since 1994. He held
the position of Country Manager at Securitas
A/S from 1991 to 1994.
Juan Vallejo.............. 1957 Mr. Vallejo is Executive Vice President and
has been employed by Parent since 1990.
Tore K. Nilsen............ 1956 Mr. Nilsen is Executive Vice President and
has been employed by Parent since 1988.
Gustaf A.S. Douglas....... 1938 Mr. Douglas has been a member of the board of
directors since 1985 and Vice Chairman since
1993. From 1985 to 1992, he was Chairman. He
is also Chairman of the board of directors of
Investment AB Latour, SakI AB, Fagerhult AB
and Stockholm Chamber of Commerce, Vice
Chairman of the board of directors of Swedish
Television, and a board member of Pharmacia &
UpJohn Inc., Assa Abloy AB and Munksjo AB. He
has served as a board member of Skanska AB,
Hasselfors AB, HQ and Oresund AB. His
business address is Forvaltnings AB
Wasatornet, P.O. Box 7031, 10386 Stockholm,
Sweden.
Philippe Foriel-Destezet.. 1935 Mr. Destezet has been a member of the board
of directors since 1998. Additionally, he has
been the Chairman of the board of directors
of Nescofin UK Ltd since 1998. Mr. Destezet
is a French citizen with UK residence, and
his business address is 29 Rutland Gate,
London SW71PD, U.K.
B. Anders Frick........... 1945 Mr. Frick has been a member of the board of
directors since 1985. He is also a board
member of Expanda AB, Fagerhult AB, Getinge
Industrier AB, Humkgarden Fastigheter AB,
Lifco AB, Nordbanken, Sweco AB and ProstaLund
AB. He has served as the President and CEO of
Arjo AB from 1985 to 1994. His business
address is Chemin de Montlellaz, F-74290
Veyrier du Lac, France.
</TABLE>
3
<PAGE>
<TABLE>
<CAPTION>
Present Principal Occupation or Employment,
Birth Material
Name Year Positions Held During the Past Five Years
--------------------------- ----- --------------------------------------------
<C> <C> <S>
Rune Lindblad.............. 1947 Mr. Lindblad has been a member of the board
of directors since 1995. He is also a
service technician with Securitas Larm AB, a
member of the Swedish electricians' Union.
His business address is Lindhagensplan 70,
Stockholm, Sweden.
R. L. Berthold Lindqvist... 1938 Mr. Lindqvist has been a member of the board
of directors since 1994. He is also Chairman
of the board of directors of Munters AB, and
a board member of Trelleborg AB, Pharmacia &
Upjohn Inc. AB, PLM AB, Gambro AB, AB Bure,
Modo Paper AB, NovoteK AB and Probi AB. He
served as President and CEO of Gambro AB
from 1984 to 1998. His business address is
Gamlegardsvagen 50, 21620 Malmo, Sweden.
C. Fredrik O. Palmstierna.. 1946 Mr. Palmstierna has been a member of the
board of directors since 1992. From 1985 to
1992, he was deputy member of the board of
directors. He is also Chairman of the board
of directors of Svenska Tempus AB, and a
board member of BPA, Fagerhult AB,
Investment AB Latour, Almedahls, and
Hultafors. He is a board member of
Hagstromer & Qviberg. He is also President
of SakI AB. His business address is SakI AB,
P.O. Box 7158, 10388 Stockholm, Sweden.
Melker Y. G. Schorling..... 1947 Mr. Schorling has been Chairman of the board
of directors since 1993. From 1987 to 1992,
he was President and CEO. He is Vice
Chairman of Assa Abloy AB, and a board
member of Cardo AB, Hennes & Mauritz AB and
the Federation of Swedish Industries. From
1993 to 1997, he was President and CEO of
Skanska AB and Chairman and Vice Chairman of
Scancem AB. Mr. Schorling also has served as
Chairman of Skanska AB from 1997 to 1998 and
JM Byggands & Fastighets AB from 1993 to
1998.
Carl F. W. Douglas......... 1965 Mr. Douglas has been a deputy member of the
board of directors since 1992. He is
currently an Analyst for the Swedish
Ministry of Defense. He is also a board
member of SakI AB, PM-Luft AB and Specma AB.
His business address is Rydboholm, S-18494
Akersberga, Sweden.
Bjorn Magne Drewa.......... 1946 Mr. Drewa has been a Field Engineer with
Securitas Bevakning AB since 1979 and a
deputy member of the board of directors of
Parent since 1996. His business address is
Securitas Bevakning AB, P.O. Box 12516,
10229 Stockholm, Sweden.
Thomas Lind................ 1966 Mr. Lind is local chairman of Securitas
Region Stockholm and a member of the board
of directors of Parent since 2000. He is
also Employee Representative for the Swedish
Transport Workers' Union.
Magnus Thelander........... 1968 Mr. Thelander is Team Leader of Securitas
Bevakning AB in Malmo and a member of the
board of directors. He has been deputy
director of Parent since 2000.
</TABLE>
4
<PAGE>
Stock Ownership
The following table sets forth, as of August 3, 2000, certain information
regarding beneficial ownership of Common Stock by all entities that, to the
best knowledge of the Company, beneficially owned more than five percent of the
Common Stock. Except as indicated, each entity has sole voting and investment
power with respect to such shares.
<TABLE>
<CAPTION>
Percent
Number of of
Name of Beneficial Owner Shares class
-------------------------------------------------------------- --------- -------
<S> <C> <C>
The Prudential Insurance Company of America(a)................ 1,375,653 6.9%
Cramer Rosenthal McGlynn, LLC(b).............................. 1,012,400 5.1%
</TABLE>
--------
(a) Pursuant to a Schedule 13G filed February 7, 2000, The Prudential Insurance
Company of America indicated that it had sole power to vote 881,053 shares
of Common Stock and sole power to dispose of 881,053 shares of Common Stock
and shared power to vote 494,600 shares of Common Stock and shared power to
dispose of 494,600 shares of Common Stock. The address for Prudential
Insurance Company of America is 751 Broad Street, Newark, NJ 07102.
(b) Pursuant to a Schedule 13G filed March 4, 2000, Cramer Rosenthal McGlynn,
LLC indicated that it had shared power to vote 1,012,400 shares of Common
Stock and shared power to dispose of 1,012,400 shares of Common Stock. The
address of Cramer Rosenthal McGlynn, LLC is 707 Westchester Avenue, White
Plains, NY 10604.
The following table sets forth, as of August 3, 2000, certain information
regarding beneficial ownership of Common Stock by the Company's directors and
executive officers named in the Summary Compensation Table and by all directors
and executive officers as a group.
<TABLE>
<CAPTION>
Number of # of Options Percent
Shares Exercisable as Restricted Outstanding Total
Name Owned(a) of 8/3/00(b) Stock(c) of Shares Shares
------------------------ --------- -------------- ---------- ----------- ---------
<S> <C> <C> <C> <C> <C>
John A. Edwardson....... 176,100 280,122 233,000 3.5 689,222
J. Joe Adorjan(e)....... 168,134 646,000 0 4.1 814,134
John D. O'Brien......... 138,617 125,000 21,800 1.4 285,417
James M. Froisland...... 0 0 10,000 * 10,000
Timothy M. Wood(e)...... 66,235 105,000 0 * 171,235
Robert E.T. Lackey...... 1,288 22,000 10,900 * 34,188
James J. Burke, Jr.(d).. 152,486 1,000 0 * 153,486
Albert J. Fitzgibbons
III.................... 30,588 1,000 0 * 31,588
Arthur F. Golden........ 0 17,000 0 * 17,000
Nancy E. Kittle......... 5,000 15,500 4,400 * 24,900
Dale W. Lang............ 20,000 20,000 0 * 40,000
Terry L. Lengfelder..... 5,000 3,000 0 * 8,000
Robert A. McCabe........ 12,000 20,000 0 * 32,000
Andrew McNally IV....... 30,000 17,000 0 * 47,000
James F. McNulty III.... 6,982 43,250 10,900 * 61,132
Alexis P. Michas(d)..... 62,127 1,000 0 * 63,127
S. Jay Stewart.......... 8,500 0 0 * 8,500
All directors and
executive officers of
the Company (17
persons)............... 883,057 1,316,872 291,000 12.5 2,490,929
</TABLE>
--------
*Represents less than one percent
(a)Includes shares for which the named person:
. has sole voting and investment power,
. John D. O'Brien's spouse has 1,500 shares and Robert A. McCabe's spouse
has 10,000 shares
5
<PAGE>
Excludes shares that:
. are restricted stock holdings, or
. may be acquired through stock option exercises within 60 days.
(b) Shares that can be acquired through stock option exercises. During 1999,
Mr. Adorjan transferred 15,000 stock options to three members of his
immediate family.
(c) Shares subject to a vesting schedule, forfeiture risk and/or other
restrictions. Includes 153,000 shares for John A. Edwardson awarded subject
to forfeiture if certain performance goals are not met.
(d) Includes 68,134 shares for Mr. Burke and 12,775 for Mr. Michas that were
acquired from the Merrill Lynch distribution.
(e) Mr. Adorjan resigned as Chairman of the Board effective June 1, 1999 and as
Chief Executive Officer and President, effective March 1, 1999. Mr. Wood
resigned from his position as Vice President and Chief Financial Officer,
effective October 28, 1999.
Board of Directors
We have divided the Company's Board of Directors into three classes. The
following sets forth, as of August 3, 2000, the name, age, principal
occupation(s) for the past five years, and other directorships of the members
of the Board of Directors.
Directors with a term expiring in 2001
<TABLE>
<CAPTION>
Name Age Principal Occupation and Directorships
--------------------------- --- ----------------------------------------------
<C> <C> <S>
James J. Burke, Jr......... 48 Partner and director of Stonington Partners,
Director since 1987 Inc., an investment firm ("Stonington"), since
1993; director of Merrill Lynch Capital
Partners ("MLCP"), an investment firm, since
1985 and Vice Chairman of MLCP since 1999. Mr.
Burke was Managing Partner of MLCP from 1993
to 1994 and was President and Chief Executive
Officer of MLCP from 1987 to 1993. Mr. Burke
is also a director of Ann Taylor Stores
Corporation, Education Management Corporation,
Pathmark Stores, Inc., Supermarket General
Holdings Corp. and United Artists Theatre
Circuit, Inc.
Albert J. Fitzgibbons III.. 54 Partner and director of Stonington since 1993
Director since 1987 and director of MLCP since 1988. Mr.
Fitzgibbons was a Partner of MLCP from 1993 to
1994 and was Executive Vice President of MLCP
from 1988 to 1993. Mr. Fitzgibbons is also a
director of Dictaphone Corporation, Merisel,
Inc. and United Artists Theatre Circuit, Inc.
Terry L. Lengfelder........ 62 Managing Partner of Arthur Andersen LLP from
Director since 1999 1979 through December 1997. Former Board
Chairman of Andersen Worldwide. Director of
Lanoga Corporation (privately held) from 1999
to present.
S. Jay Stewart*............ 61 Chairman of the Board and Chief Executive
Officer of Morton International, Inc.
("Morton") from April 1996 to October 1999.
From July 1989 to April 1994, Mr. Stewart was
the President and Chief Operating Officer of
Morton. Mr. Stewart is also a director of
Household International, Inc. and Autoliv,
Inc.
</TABLE>
--------
* At the February 14, 2000 Board of Directors meeting, Mr. Stewart was elected
as a director, effective April 24, 2000, for a term expiring in 2001.
6
<PAGE>
Directors with a term expiring in 2002
<TABLE>
<CAPTION>
Name Age Principal Occupation and Directorships
---- --- --------------------------------------
<C> <C> <S>
John A. Edwardson.. 50 Chairman of the Board (since June 1999), Chief
Director since 1999 Executive Officer and President (since March 1999).
Former President from July 1994 to September 1998 and
Chief Operating Officer from April 1995 to September
1998 of United Airlines, Inc. Former Executive Vice
President and Chief Financial Officer from June 1991
to July 1994 of Ameritech Corp. Mr. Edwardson is also
a director of Household International, Focal
Communications Corporation and Loomis, Fargo & Co.
Robert A. McCabe... 65 Chairman of Pilot Capital Corporation, an investment
Director since 1993 firm, since 1999. Former President from 1987 to 1999.
Mr. McCabe is also a director of Atlantic Bank, Church
& Dwight Co., Inc., Thermo Electron Corporation and
Thermo Optek, Inc.
Alexis P. Michas... 42 Managing Partner since 1996 and a director of
Director since 1987 Stonington since 1993 and a Managing Partner and a
director of Stonington Partners, Inc. II, since 1994.
Mr. Michas has been a director of MLCP since 1989 and
was a Consultant to MLCP from 1994 through 1999. He
was also a Managing Director of the Investment Banking
Division of Merrill Lynch, Pierce, Fenner & Smith
Incorporated from 1991 to 1994. Mr. Michas is also a
director of BorgWarner Inc., Dictaphone Corporation,
Goss Graphic Systems, Inc. and Packard BioScience
Company.
Directors with a term expiring in 2003
<CAPTION>
Name Age Principal Occupation and Directorships
---- --- --------------------------------------
<C> <C> <S>
Arthur F. Golden... 53 Partner of Davis Polk & Wardwell, a law firm, since
Director since 1996 1978.
Dale W. Lang....... 67 President of KX Acquisition Corp., an owner and
Director since 1993 operator of television stations, since 1992. Chairman
of Lang Communications, Inc., a magazine publishing
company (1989 to 1997). Chairman of Medizine, Inc., a
publisher and consumer health provider, since 1996,
and Chairman of Aptura Technologies, LCC, an internet
company, since 1998.
Andrew McNally IV.. 60 Retired Chairman and Chief Executive Officer of Rand
Director since 1996 McNally, a publishing and map making company. Mr.
McNally was Chairman and Chief Executive Officer from
1993 to 1997 and President and Chief Executive Officer
from 1978 to 1993 of Rand McNally. Mr. McNally is also
a director of Hubbell Incorporated, Morgan Stanley
Funds and Reinhold Industries.
</TABLE>
Compensation of Directors
We do not pay directors who are also officers of the Company additional
compensation for their service as directors. In 1999, compensation for non-
employee directors included the following:
. an annual retainer of $18,000;
. $1,000 for each Board meeting attended;
. $1,000 for each Board committee meeting attended;
. $1,250 for Committee Chairpersons; and
. expenses of attending Board and Committee Meetings.
7
<PAGE>
Since January 2000, annual retainer and Board and Committee meeting fees
have been paid quarterly and in arrears.
Pursuant to the Burns International Services Corporation 1993 Stock
Incentive Plan, each non-employee director received options to purchase 10,000
shares of Common Stock having an exercise price equal to the fair market value
of the Common Stock, as of November 16, 1993, or, if later, the date such
person becomes a director. All such options expire ten years after the date of
grant and become exercisable in equal installments on each of the first five
anniversary dates of the date of grant, if on such date the optionee is still a
director of the Company.
On February 4, 1997, each non-employee director was granted options to
purchase 6,000 shares of Common Stock having an exercise price per share equal
to $11.3125, which was the average of the high and low trading prices of the
Common Stock on such date. All such options expire ten years after the date of
grant and become exercisable in equal installments on each of the first three
anniversary dates of the date of grant. Such options become immediately
exercisable upon a change in control of the Company or the retirement of the
non-employee director from the Company's board.
In accordance with a non-employee director stock option plan approved by the
stockholders, each non-employee director will be granted options to purchase
1,000 shares of Common Stock annually on the third business day after the
annual meeting. Such options will have an exercise price per share equal to the
average of the high and low trading prices of the Common Stock on such date.
On April 23, 1999, 1,000 options, having an exercise price per share equal
to $16.1875, were granted to each of the non-employee directors. All such
options will be immediately exercisable and expire ten years after the date of
grant.
During 1997 the Company amended its existing Directors Stock Appreciation
Rights Plan by extending the expiration date of the rights issued thereunder
from July 31, 1997 to July 31, 2000. Pursuant to such amendment, the stock
appreciation rights of Alexis P. Michas, Albert J. Fitzgibbons III and James J.
Burke were stock settled on July 31, 2000. On such date, Messrs. Michas,
Fitzgibbons III and Burke received 9,352, 15,588 and 9,352 shares of Common
Stock, respectively.
The Company had a consulting agreement with Mr. Schwarzkopf* pursuant to
which he had agreed to provide consulting and advisory services to the Company
and its subsidiaries with respect to the development of an overall strategy for
the operations of the Company and its subsidiaries and the management,
training, motivation and utilization of its physical security personnel. The
Company paid Mr. Schwarzkopf a consulting fee of $5,000 per month. The
Consulting Agreement expired on April 30, 2000.
During 1999 and 2000 the Company periodically retained the law firm of Davis
Polk & Wardwell, of which Mr. Golden is a partner, to advise the Company on
various matters.
--------
* Mr. Schwarzkopf, whose term expired at the 2000 Annual Meeting of
Stockholders, held April 24, 2000, chose not to stand for reelection.
8
<PAGE>
Certain Relationships and Related Transactions
The Company had a consulting agreement with Mr. Norman H. Schwarzkopf for a
fee of $5,000 per month. This agreement expired on April 30, 2000. See
Compensation of Directors.
During 1999 and 2000 the Company periodically retained the law firm of Davis
Polk & Wardwell, of which Mr. Golden is a partner, to advise the Company on
various matters.
Meetings of the Board of Directors and Committees
The Board of Directors held six meetings during 1999. With the exception of
Mr. Schwarzkopf, each director attended at least 75% of the meetings of the
Board of Directors and any committee they served.
<TABLE>
<CAPTION>
Name of Committee General Functions of the Meetings in
And Members Committee 1999
------------------------------ --------------------------------- -----------
<C> <S> <C>
Finance and Audit Committee . recommend selection of 5
independent accountants to
conduct the annual audit of
the books and accounts of the
Company;
Terry L. Lengfelder (Chairman) . review the proposed scope of
such audit and approve the
James J. Burke, Jr. audit fees to be paid;
Arthur F. Golden . review the adequacy and
effectiveness of the internal
Alexis P. Michas auditing, accounting and
financial controls of the
Company
S. Jay Stewart with the independent certified
public accountants and the
Company's financial and
accounting staff;
. review the Company's capital
plans;
. advise the Board of Directors
on corporate financial policy
matters;
. review with the independent
accountants and management the
scope and results of audits;
and
. assure that the independent
accountants act independently.
. The Board of Directors adopted
a written charter for the
Audit Committee, a copy of
which is attached as Appendix
A to this Information
Statement.
Executive Committee . exercise all the powers and 1
authority of the Company,
except as limited by Delaware
law.
John A. Edwardson (Chairman)
Arthur F. Golden
Andrew McNally IV
Alexis P. Michas
Compensation Committee . determine executive 4
compensation, including base
salary, bonuses and stock
incentives;
Robert A. McCabe (Chairman) . review employee benefit plans
and approve changes to
Albert J. Fitzgibbons III executive officer benefit
plans;
. review changes to the
Company's organization
Dale W. Lang structure;
. review the Company's key
Andrew McNally IV executive development and
Alexis P. Michas succession plans; and
. recommend director
compensation and benefits.
. recommend prospective nominees 1
Nominating Committee for the Board of
Directors.
Andrew McNally IV (Chairman)
Albert J. Fitzgibbons III
Dale W. Lang
Robert A. McCabe
</TABLE>
9
<PAGE>
Section 16(a) Beneficial Ownership Reporting Compliance
Section 16(a) of the Securities and Exchange Act of 1934 requires the
Company's officers, directors, and greater than 10% stockholders, to file
certain reports with respect to beneficial ownership of the Company's equity
securities. Based on information provided to the Company by each officer,
director, and greater than 10% stockholder, the Company believes all reports
required to be filed in 1999 were timely filed.
Executive Officers
Set forth below are the names, ages, positions and certain other information
concerning the executive officers of the Company as of August 3, 2000.
<TABLE>
<CAPTION>
Name Age Position With Company
---- --- ---------------------
<S> <C> <C>
John A. Edwardson....... 50 Chairman of the Board, President and Chief Executive Officer
John D. O'Brien......... 57 Senior Vice President
James M. Froisland...... 49 Vice President and Chief Financial Officer
Robert E. T. Lackey..... 51 Vice President, General Counsel and Corporate Secretary
James F. McNulty........ 50 Vice President and President, Total Security Solutions
Nancy E. Kittle......... 47 Vice President, Human Resources
</TABLE>
Mr. Edwardson has been Chairman of the Board since June 1999 and Chief
Executive Officer and President since March 1999. Mr. Edwardson was President
from 1994 to 1998 and Chief Operating Officer from 1995 to 1998 of United
Airlines, Inc. and was Executive Vice President and Chief Financial Officer
from 1991 to 1994 of Ameritech Corp. Mr. Edwardson is also a director of
Household International and Focal Communications Corporation.
Mr. O'Brien has been Senior Vice President of the Company since 1993 and was
Vice President of the Company from 1987 to 1993. Mr. O'Brien is also President
of Burns International Security Services Corporation and a director of Loomis,
Fargo & Co.
Mr. Froisland joined the Company in February 2000 as Vice President and
Chief Financial Officer. Prior to that, and starting in 1996, Mr. Froisland was
Vice President, Corporate Controller of Anixter International, Inc. He served
as Vice President, Corporate Controller for Budget Rent A Car Corporation from
1992 to 1996, and Chief Financial Officer of Allsteel, Inc. from 1990 to 1992.
Mr. Lackey has been Vice President, General Counsel and Secretary of the
Company since 1997 and was Vice President, General Counsel and Secretary of
Transamerica Commercial Finance Corp. from 1991 to 1995.
Mr. McNulty has been President of Burns International Total Security
Solutions since 1997, and was Executive Vice President of Burns International
Security Services Corporation from 1995 to 1997 and President of Burns
International Security Services North Central business unit from 1987 to 1995.
Ms. Kittle has been Vice President, Human Resources since 1996 and was
Senior Vice President, Human Resources for Forte Hotels, Inc. from 1991 to
1995.
10
<PAGE>
Executive Compensation
The following table shows the cash and other compensation paid or accrued by
the Company and its subsidiaries to the Company's Chief Executive Officer and
the other persons who were serving as executive officers at December 31, 1999
for each of the three years ending December 31, 1999.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
Annual
Compensation Long-Term Compensation
---------------- ---------------------------------------
Securities
Restricted Underlying LTIP All Other
Name and Position Year Salary Bonus Stock Options(#) Payouts(b) Compensation(c)
---------------------------- ---- -------- ------- ---------- ---------- ---------- ---------------
<S> <C> <C> <C> <C> <C> <C> <C>
John A. Edwardson........... 1999 $625,000 $ 0 80,000 546,788(d) $ 0 $ 304,841
Chairman, Chief 1998 0 0 0 0 0
Executive Officer and 1997 0 0 0 0 0
President
J. Joe Adorjan(a)........... 1999 675,000 0 0 50,000 0 593,263
Former Chairman, Chief 1998 900,000 500,000 0 0 776,252 463,349
Executive Officer and 1997 900,000 426,667 0 300,000 0 453,022
President
John D. O'Brien............. 1999 357,000 0 0 70,000(d) 0 179,775
Senior Vice President 1998 357,000 247,000 0 0 587,041 166,298
1997 325,000 177,333 0 75,000 0 155,888
Timothy M. Wood(f).......... 1999 319,000 0 0 50,000 0 1,349,589
Former Vice President 1998 319,000 223,000 0 0 587,041 132,826
and Chief Financial Officer 1997 290,000 161,000 0 75,000 0 112,782
Robert E.T. Lackey.......... 1999 178,750 0 0 30,000(d) 0 49,109
Vice President, General 1998 170,000 144,200 0 0 0 37,794
Counsel and Secretary 1997 114,782 70,560 0 12,000 0 18,333
James F. McNulty III(d)(e).. 1999 248,333 0 0 25,000(d) 0 71,609
Vice President, Sales and 1998 0 0 0 0 0 0
Marketing 1997 0 0 0 0 0 0
Nancy E. Kittle(d)(e)....... 1999 140,416 0 0 17,500(d) 0 48,868
Vice President, Human 1998 0 0 0 0 0 0
Resources 1997 0 0 0 0 0 0
</TABLE>
--------
(a) On April 16, 1995, 177,778 shares of Common Stock were deposited into a
Company trust for the benefit of Mr. Adorjan. Such shares were distributed,
together with any dividends or other distributions made with respect
thereto, in equal installments on each of the first four anniversaries of
April 16, 1995. On such anniversary dates, the Company also paid deferred
compensation of $250,000 to Mr. Adorjan.
(b) Represents the total value of awards paid out under the performance share
plan for 1998 performance. Awards were paid in cash and stock and included
(i) 22,000 shares for Mr. Adorjan; (ii) 16,637 shares for Mr. O'Brien; and
(iii) 16,638 shares for Mr. Wood.
(c) During 1999, represents (i) for Mr. Edwardson, $283,566 contributed to an
annuity established for his benefit, $17,070 car allowance and $4,205 for
club memberships; (ii) for Mr. Adorjan $250,000 of deferred compensation
discussed in note (a), $153,318 contributed to an annuity established for
his benefit, $159,939 which represents premium on split dollar life
insurance policy, $7,192 for use of a private plane and $22,814 car
allowance; (iii) for Mr. O'Brien, $118,017 contributed to an annuity
established for his
11
<PAGE>
benefit and $34,204 credited pursuant to the Company's Retirement Savings
Excess Plan (the "Excess Plan"), $21,314 car allowance and $6,240 for club
memberships; (iv) for Mr. Wood, $105,098 contributed to an annuity
established for his benefit, $15,594 credited pursuant to the Excess Plan,
$1,199,757 severance payments in accordance with his Employment Agreement,
$17,779 car allowance, $7,141 for financial counseling and $4,220 for club
memberships; (v) for Mr. Lackey, $41,249 contributed to an annuity
established for his benefit and $7,860 car allowance; (vi) for Mr. McNulty,
$54,209 contributed to an annuity established for his benefit, $12,000 car
allowance and $5,400 for club memberships; and (viii) for Ms. Kittle,
$27,581 contributed to an annuity established for her benefit, $13,427 for
relocation expenses and $7,860 car allowance. During 1998 and 1997,
represents amounts contributed by the Company for the named executive
officers to annuities established for their benefit, credits made pursuant
to the Excess Plan, deferred compensation discussed in note (a), the value
of the benefit of a split dollar life insurance policy for Mr. Adorjan, and
certain corrections for additional sums related to car allowance, financial
counseling and other perquisites.
(d) Includes options received in lieu of bonus for performance in 1999.
(e) Ms. Kittle first became a named executive officer in 1999 and Mr. McNulty
on February 14, 2000.
(f) Mr. Wood resigned as Vice President and Chief Financial Officer on October
28, 1999.
Stock Options
During 1999, the following named executive officers received stock options:
<TABLE>
<CAPTION>
Potential realizable
value at
assumed annual rates
of
stock price
Individual Grants appreciation(d)
------------------------------------------- ----------------------
Number of
securities Percent of total
underlying options granted to
options employees in Exercise Expiration
Name granted(#) fiscal year Price($/Sh) Date 5%($) 10%($)
------------------------ ---------- ------------------ ----------- ---------- ---------- -----------
<S> <C> <C> <C> <C> <C> <C>
John A. Edwardson....... 400,000(a) 27.2% $17.6250 2/23/12 $6,243,826 $17,288,512
146,788(b) 10.0% 10.2188 12/23/09 943,340 2,390,609
J. Joe Adorjan.......... 50,000(c) 3.4% 18.8125 4/16/03 591,554 1,499,114
John D. O'Brien......... 50,000(c) 3.4% 18.8125 1/11/09 591,554 1,499,114
20,000 1.4% 10.2188 12/23/09 128,531 325,723
Timothy M. Wood......... 50,000(c) 3.4% 18.8125 1/3/01 591,554 1,499,114
Robert E.T. Lackey...... 20,000(c) 1.4% 18.8125 1/11/09 236,622 599,646
10,000 0.7% 10.2188 12/23/09 64,265 162,861
James F. McNulty........ 15,000(c) 1.0% 18.8125 1/11/09 177,466 449,734
10,000(b) 0.7% 10.2188 12/23/09 64,265 162,861
Nancy E. Kittle......... 10,000(c) 0.7% 18.8125 1/11/09 118,311 299,823
7,500(b) 0.5% 10.2188 12/23/09 48,199 122,146
</TABLE>
--------
(a) Options granted at the fair market value of the Common Stock on the date of
grant. Options become exercisable in equal annual installments on each of
the first, second and third anniversaries of the date of grant. In the
event of a change in control, all options become fully exercisable.
(b) Options granted in lieu of 1999 bonuses. These options were granted under
the 1999 Stock Incentive Plan at the fair market value of the Common Stock
on the date of grant. Options became fully exercisable on February 15,
2000.
(c) Options granted under the Company's 1993 Stock Incentive Plan at the fair
market value of the Common Stock on the date of grant. Options become fully
exercisable seven years from the date of grant, with the possibility of
earlier exercisability if the Company achieves pre-determined performance
goals.
(d) The dollar amounts indicated in these columns result from calculations
assuming 5% and 10% growth rates as required by the rules of the Securities
Exchange Commission and are not intended to forecast possible future
appreciation, if any, of the Company's stock price. The actual future value
of the options will depend on the market value of the Common Stock.
12
<PAGE>
The following table sets forth information concerning exercised and
unexercised options held by the named executive officers at the end of 1999.
The number of unexercisable options represents shares that become exercisable
upon the satisfaction of certain periods of employment. The value of
unexercised options represents the difference between the exercise price and
the share price of Common Stock at December 31, 1999. An option is in-the-money
if the share price of Common Stock exceeds the exercise price.
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR END OPTION VALUES
<TABLE>
<CAPTION>
Number of unexercised Value of Unexercised in the
Options at year end (#) Money options at year end ($)
Shares Value ------------------------- ---------------------------------
Name Acquired Realized($) Exercisable Unexercisable Exercisable Unexercisable
------------------------ -------- ----------- ----------- ------------- --------------- ---------------
<S> <C> <C> <C> <C> <C> <C>
John A. Edwardson....... 0 $ 0 0 546,788 $ 0 $ 64,220
J. Joe Adorjan.......... 0 0 461,000 185,000 648,720 0
John D. O'Brien......... 0 0 67,500 107,500 0 8,750
Timothy M. Wood......... 0 0 67,500 87,500 0 0
Robert E.T. Lackey...... 0 0 6,000 36,000 0 4,375
James F. McNulty III.... 1,000 1,174 25,750 32,500 0 4,375
Nancy E. Kittle......... 0 0 4,000 21,500 375 3,656
</TABLE>
Performance Share Awards
The following table sets forth information concerning awards made during
1999 pursuant to the Company's Performance Share Plan. Awards are stated in
shares of Common Stock. The performance period for such awards over which
achievement of specified performance goals is measured is the year ending
December 31, 2000. The performance criteria established for such awards is the
Company's earnings per share. The Compensation Committee has reserved the right
to define earnings for purposes of determining satisfaction of the performance
goal. In that regard, the Compensation Committee presently intends to consider
primarily income from operations and assess earnings from extraordinary gains
based on appropriateness of such earnings to the Performance Share Plan.
LONG-TERM INCENTIVE PLANS--AWARDS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
Performance or other period
Name until maturation or payment Threshold (#) Target (#) Maximum (#)
------------------------ --------------------------- ------------- ---------- -----------
<S> <C> <C> <C> <C>
John A. Edwardson....... Shares Vesting in 2001 50,000 100,000 180,000
</TABLE>
Certain Agreements
The Employment Agreement, dated March 28, 1995 and amended September 5,
1997, for Mr. Adorjan was nullified by a transition plan approved by the Board
of Directors in April 1999. The transition plan was instituted to effectuate an
orderly transition of the chief executive officer and chairman positions from
Mr. Adorjan to Mr. Edwardson, and Mr. Adorjan's orderly retirement from the
Board and the Company. Under the transition plan, Mr. Adorjan resigned as Chief
Executive Officer on March 1, 1999 and as Chairman on June 1, 1999. He retired
from the Board on October 26, 1999. Mr. Adorjan retired from the Company on
April 16, 2000.
Under the transition plan, Mr. Adorjan's base salary, effective as of July
15, 1999, was reduced to $37,000 per month and his 1999 bonus opportunity was
reduced by 25%. The Company transferred to an irrevocable
13
<PAGE>
trust the split dollar life insurance policy maintained by it under the
Employment Agreement and forgave the repayment of approximately $160,000 in
premiums. Effective December 15, 1999, Mr. Adorjan was placed on unpaid leave
of absence as a non-executive employee until April 16, 2000.
As part of his retirement portion of the transition plan, exercisability of
his vested options was extended until 2003; title to his company car was
transferred to him on January 1, 2000; tax planning benefits were extended
through the 2000 tax season; and eligibility was granted to him for a pro rata
distribution of any performance shares earned by the Company as of December 31,
2000.
In return for certain post-employment office support, not to exceed $30,000
per year for two (2) years, Mr. Adorjan agreed to provide certain consulting
services to the Company in the areas of acquisitions and strategic planning.
The Company has an employment agreement with Mr. Edwardson under which he
serves as the chief executive officer and president of the Company through
March 1, 2002. The agreement contains certain automatic renewal provisions and
further provides Mr. Edwardson with an annual base salary of $750,000; an
annual cash performance based bonus opportunity ranging from $300,000 to
$800,000 (with a 1999 annual bonus award of not less than $500,000 subject to
certain deferral provisions to comply with Section 162(m) of the Internal
Revenue Code); a minimum annual contribution to a tax deferred annuity of
$165,000; an award of 100,000 restricted shares of Common Stock having an
aggregate value, as of February 23, 1999, of $1,762,500 which will vest in
equal installments on each of the first five anniversaries of the date of
grant; an award of 13-year options to purchase 400,000 shares of Common Stock
which become exercisable in equal installments on each of the first three
anniversaries of date of the agreement, subject to certain deferral provisions
to comply with Section 162(m) of the Internal Revenue Code; and an award of
100,000 Performance Shares on the first day of employment and another 100,000
Performance Shares by not later than March 31, 2000 under the Company's 1999
Stock Incentive Plan (the "Plan"). Subsequent stock option grants are as
determined by the Board of Directors. Mr. Edwardson is also eligible to
participate in all incentive, savings, retirement, benefit plans and programs
extended to other key executives of the Company.
In December 1999, Mr. Edwardson and the Company agreed that, in lieu of his
1999 minimum annual bonus award of $500,000 described above, Mr. Edwardson be
granted stock options under the Burns International Services Corporation 1999
Stock Incentive Plan to purchase from the Company 146,788 shares of common
stock at a price of $10.2188 and with a vesting date of February 15, 2000.
Under such employment agreement, if Mr. Edwardson's employment is terminated
by the Company for reasons other than for death, "disability" or "cause" (as
such terms are defined in the employment agreement) or by Mr. Edwardson for
"good reason" (which includes, among other things, termination of employment
within a 30 day period following the three month period after a "change in
control"), Mr. Edwardson would receive severance and noncompete pay, as
follows: (i) an amount equal to the unpaid annual base salary and supplemental
benefit compensation through the date of termination, plus a prorated bonus
award at the targeted level through the date of termination, plus an amount
equal to any accrued but unpaid bonus related to any prior year; and, (ii) an
amount equal to the sum of the annual base salary, bonus and supplemental
benefit compensation for the period from the date of termination to the end of
the then contract employment period, less $1,000,000. The agreement also
provides for the vesting of unvested stock options, performance shares and
restricted share awards. The agreement also provides for certain gross up
payments in the event that Mr. Edwardson is subject to an excise tax on his
termination or related payments. The Company must continue to provide certain
fringe benefits to Mr. Edwardson through the first anniversary of the date of
termination (reduced by any comparable benefit received from another employer
during this period). Upon such termination of employment, Mr. Edwardson has
agreed, among other things, not to compete with the Company for two years after
such termination.
The Company has employment agreements with Messrs. O'Brien and Wood (the
"Agreements"). Under the Agreements, among other things, if the executive's
employment is terminated by the Company other than
14
<PAGE>
for death, "disability," "retirement" or "cause" (as such terms are defined in
the Agreements) or by the executive for "good reason" (which includes, among
other things, termination of employment within a 30 day period following the
first anniversary of a "change in control"), the executive would receive
severance and noncompete pay equal to twice his annual base salary, annual
bonus (at the expected level) and supplemental benefit compensation payable
during the 12 month period following the date of termination at the rate in
effect at the date of termination. Such executive would also be paid any
portion of his annual base salary not paid as of date of termination, a
prorated annual bonus for year of termination (at the expected level), all
accrued and unpaid bonus and vacation pay, all unpaid deferred compensation and
all unpaid accrued benefits under the Excess Plan. In addition, after a "change
in control" such executive would receive a pro rata payment of his annual bonus
for the year in which the change in control occurs based on the Company's
performance for the period ending on such change in control as determined by
the Compensation Committee of the Board of Directors. The Agreements also
provide for certain gross up payments in the event that the executive is
subject to an excise tax on his termination or related payments. The Company
must continue to provide certain fringe benefits to such executive through the
second anniversary of the date of termination (reduced by any comparable
benefit received from another employer during this period). Upon such
termination of employment, each executive has agreed, among other things, not
to compete with the Company for three years after termination of employment.
Mr. Wood resigned as Vice President, Chief Financial Officer, on October 28,
1999 and severed his employment with the Company on January 3, 2000. Mr. Wood
was compensated in January 2000 with severance benefits substantially in
conformity with his employment agreement set forth above.
The Company entered into agreements with Messrs. Lackey, McNulty and
Froisland and Ms. Kittle which provide, in the event of termination of
employment upon a change in control or within twenty-four months thereafter,
they will be entitled to their respective annual salary, a prorated bonus award
at targeted level and other supplemental benefits paid through the date of
termination, plus a lump sum payment equal to two (2) times the sum of the
respective employee's annual base salary, annual bonus award at targeted level
and supplemental benefits contributions. The Company will also provide medical,
life and other insurance benefits to the employee and his/her family and
outplacement services for up to twenty-four months after termination. The
agreements also provide for the vesting of unvested stock options, performance
shares and restricted share awards. The agreements also provide for certain
gross up payments in the event that the executive is subject to an excise tax
on his or her termination or related payments. On August 2, 2000, the Board
amended the agreements such that Parent must decide by December 29, 2000
whether or not it will terminate the executive's employment with the Company.
In connection with and subject to the consummation of the transactions
contemplated by the Merger Agreement, the Company's Board of Directors has
approved the payment of additional retention and performance bonuses to the
following executive officers in the amounts indicated: Mr. Lackey ($500,000);
Mr. McNulty ($550,000); Mr. Froisland ($325,000); and Ms. Kittle ($325,000).
Compensation Committee Report on Executive Compensation
The Compensation Committee of the Board of Directors is composed of
directors who are not employees of the Company. The Committee is responsible
for setting and administering the policies that govern base salary and annual
and long-term incentive programs for the executive officers of the Company.
Overall Policy
The Company's executive compensation program is designed to link executive
compensation to corporate performance and returns to stockholders. To this end,
the Company has developed an overall compensation strategy and specific
compensation plans that tie executive compensation to the Company's success in
meeting specified performance goals.
15
<PAGE>
The following compensation guidelines are intended to facilitate the
achievement of the Company's business strategies:
. Emphasize variable, at-risk compensation that is based on meeting
specified performance goals in annual plans as well as stock option and
performance share plans.
. Target compensation levels at rates that reflect market practices to
enhance the Company's ability to attract, retain, and encourage the
development of high-quality executives.
. Encourage, over the long term, personal equity ownership to align
executives' interests with those of the stockholders.
The Company's executive compensation program consists of base pay, annual
incentives and equity based long-term incentives. The Committee reviews the
program annually and targets total compensation in a range similar to total
compensation for executives in general industry, as shown in published
executive compensation surveys, with consideration to known compensation
practices in relevant service industry companies. To assist in determining
competitive pay practices, the Committee also utilizes information provided by
qualified independent consultants.
The Committee determines the compensation of the Company's Chief Executive
Officer and the other named executive officers, whose compensation is detailed
in this Proxy Statement. The Committee reviews the policies established for the
next level of management, including other corporate and subsidiary executives,
and evaluates and administers all equity-based compensation plans. In reviewing
the individual performance of the executives (other than Mr. Edwardson), the
Committee takes into account the views of Mr. Edwardson.
Base Salary
The Committee targets base salaries to be at or above median levels provided
to executives with similar responsibilities in industry in general. In 1999,
the salary of Mr. Edwardson was established by his employment agreement,
amended and restated March 26, 1999. Messrs. Lackey and McNulty and Ms. Kittle
received salary increases in 1999 that are consistent with the above stated
policies. There were no other changes to the base salaries of named executive
officers in 1999.
Annual Incentive
The Company's executive officers are eligible for an annual cash incentive.
Executives are assigned threshold, target and maximum award opportunities that
are based on the Company's compensation strategy.
For the named executive officers, the Committee sets performance goals based
on specified business criteria. For 1999, none of the 1998 named executives
earned a cash incentive payment.
Although annual incentives for other corporate and subsidiary executives
depend primarily on the achievement of established performance objectives, the
Committee may adjust awards based on other financial or non-financial actions
or circumstances that the Committee believes will benefit long-term stockholder
value.
Stock Incentive Plans
The Company uses stock incentives in the form of stock options, performance
shares and restricted stock to align executives' interests with those of the
stockholders and to motivate executives to continue the long-term focus
required for the Company's future success. The stock incentives have vesting
provisions that support the Company's objective of retaining high-quality
executives. In granting stock incentives, the committee considers the potential
impact of each position, individual contribution, the size and timing of
previous awards and competitive practices described in independently published
executive compensation surveys and proxy statements of peer companies.
16
<PAGE>
There were no distributions of performance shares based on 1999 company
performance. Only Mr. Edwardson received a performance share award in 1999. It
is described under the heading "Compensation of the Chief Executive Officer".
During 1999, the Company granted stock options to Mr. Edwardson and the
other named executive officers of the Company. Additionally, Ms. Kittle, Mr.
McNulty and certain key managers who earned annual incentives in 1999 elected
to receive stock options instead of cash bonuses.
In recognizing the decentralized, people intensive nature of this business,
the committee also granted performance related stock options to named executive
officers and key managers at all levels of the organization in 1999. Under the
terms of the performance stock option grants, participants must attain pre-
determined value growth targets for their respective areas of responsibility in
order to vest their awards within a 3-year time frame.
Compensation of the Chief Executive Officer
Mr. Edwardson's compensation is established by the terms of his employment
agreement. The terms of the agreement are described in the section entitled
"Employment Agreements".
Mr. Edwardson's salary is at the appropriate level to attract him to the
position of Chief Executive Officer of Burns International Services
Corporation, and the committee believes that Mr. Edwardson's contributions to
the Company's earnings and strategic repositioning merit this salary.
The terms of Mr. Edwardson's employment agreement include a minimum annual
incentive of $500,000 for 1999. Mr. Edwardson elected to forego the receipt of
the cash incentive and was granted 146,788 stock options instead.
In accordance with the terms of Mr. Edwardson's employment agreement, the
committee granted him long-term incentives in the form of stock options,
performance shares and restricted stock in 1999. The performance shares may
result in actual distribution of shares to Mr. Edwardson according to
achievement of threshold, target and maximum performance goals in 2000. If the
threshold performance is not achieved, no shares will be distributed under the
performance share award. The restricted stock will vest in equal increments
over five years, beginning in 2000.
In order to facilitate Mr. Edwardson's succession to the position of Chief
Executive Officer, the committee and Mr. Adorjan agreed to a transition plan
that nullified the terms of Mr. Adorjan's employment agreement. The plan
provided for, among other things, a reduction of Mr. Adorjan's base salary to
$37,000 per month from July 15 through December 15, 1999, and transfer to the
status of unpaid leave of absence from December 16, 1999 through April 16,
2000, at which time he will retire and be eligible for post-retirement life and
medical benefits. The committee also extended the post-retirement stock option
exercise period on stock options granted to Mr. Adorjan under the 1987
Management Stock Option Plan for 3 years, which is consistent with the
provisions of incentive plans approved by the shareholders in 1997 and 1999.
Deductibility of compensation in excess of $1 million per year
Internal Revenue Code section 162(m), in general, precludes a public
corporation from claiming a tax deduction for compensation in excess of $1
million in any taxable year for its executive officers named in the cash
compensation table in such corporation's proxy statement. Certain performance-
based compensation is exempt from this tax deduction limitation. The
committee's policy is to structure executive compensation in order to maximize
the amount of the Company's tax deduction. However, the committee reserves the
right to deviate from that policy in order to serve the best interests of the
Company. Such a deviation may occur under the terms of Mr. Edwardson's
employment agreement. The Committee believes that the provisions of the
employment agreement were necessary in order to recruit and retain Mr.
Edwardson for the Company.
17
<PAGE>
The Company's incentive plans are structured to provide that any
compensation paid to other named executive officers that may exceed the section
162(m) limit will qualify for the performance-based exemption.
Robert A. McCabe
Albert J. Fitzgibbons III
Dale W. Lang
Andrew McNally IV
Alexis P. Michas
18
<PAGE>
Performance Graph
The graph below compares the percentage change in cumulative total
stockholder return on the Company's Common Stock with (i) the cumulative total
return of the Standard & Poor's MidCap 400 and (ii) the Dow Jones Industrial &
Commercial Services Index. The total return for each component assumes that
$100 was invested on December 31, 1994 and that dividends were reinvested as
they were paid. The total return for the Company assumes that $100 was invested
on December 31, 1994. The S&P MidCap 400 tracks the aggregate price performance
of equity securities of 400 companies selected in the market capitalization
range of $183 million to $12.7 billion. The DJ Index tracks the price
performance of equity securities of companies that provide services to other
commercial enterprises.
COMPARISON OF 5 YEAR CUMULATIVE TOTAL RETURN*
AMONG BURNS INTERNATIONAL SERVICES CORPORATION,
THE S&P MIDCAP 400 INDEX
AND THE DOW JONES INDUSTRIAL SERVICES INDEX
[LINE CHART]
Burns
International S&P Dow Jones
Services Midcap Industrial
Corporation 400 Services
-------------- -------- ----------
12/94 100.00 100.00 100.00
12/95 128.21 130.94 127.99
12/96 110.26 156.08 139.60
12/97 180.77 206.43 160.39
12/98 192.31 236.21 190.10
12/99 110.90 270.99 222.53
19
<PAGE>
Appendix A
Approved at the 4/24/00 Board Meeting
BURNS INTERNATIONAL SERVICES CORPORATION
FINANCE AND AUDIT CHARTER
Purpose
The purpose of the Finance and Audit Committee is to provide assistance to
the Board of Directors in fulfilling their monitoring obligations with respect
to the Corporation's financial policies, accounting and reporting practices,
the quality and integrity of its financial statements, the independence and
performance of the Corporation's internal and external auditors, and the
Corporation's compliance with legal and regulatory requirements. The Finance
and Audit Committee shall provide an open avenue of communication between the
Corporation's internal audit department, the independent auditor and the Board
of Directors.
General
The Finance and Audit Committee is a standing committee of the Board of
Directors and shall be comprised of at least three Directors of the
Corporation. The members of the Finance and Audit Committee shall meet the
independence requirements of the New York Stock Exchange. Each member of the
Finance and Audit Committee shall be financially literate as such qualification
is interpreted by the Board of Directors in its business judgment. In addition,
at least one member shall have accounting or related finance management
expertise, as such qualification is interpreted by the Board of Directors in
its business judgment. The Finance and Audit Committee shall make regular
reports to the Board of Directors.
The Finance and Audit Committee policies and procedures should remain
flexible in order to react to changing conditions and environment and to assure
that the Corporation's accounting and reporting practices are in accordance
with all requirements. At meetings of the Finance and Audit Committee,
sufficient opportunity shall be made available for the independent auditor to
meet with the members of the Finance and Audit Committee without members of
management present. These meetings may include the independent auditor's
evaluation of the Corporation's financial, accounting and internal auditing
personnel and any assessments of the Corporation which the independent auditor
determined during its review.
The Finance and Audit Committee shall maintain minutes of its meetings. The
Finance and Audit Committee shall investigate any matter brought to its
attention within the scope of its duties and may retain outside counsel and
other third party experts for this purpose if, in its judgment, such retention
is appropriate.
The Finance and Audit Committee shall review the adequacy and
appropriateness of its Charter at least annually. If the Finance and Audit
Committee believes that its Charter should be amended, it shall submit such
recommendation to the Board of Directors for approval.
In its finance capacity, the Finance and Audit Committee shall:
. advise the Board of Directors on corporate financial policy;
. advise the Board of Directors on debt limits and related corporate
financial matters;
. recommend dividend policy to the Board of Directors;
. review capital plans;
. recommend to the Board of Directors the investment policy for those
investment portfolios specified in resolutions adopted, from time to
time, by the Board of Directors and monitoring the investment
performance thereof; and
. review fund performance for the Corporation's employee benefit plans.
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In its audit capacity, the Finance and Audit Committee shall:
Document/Reports Review
. review with management and the independent auditor the annual audited
financial statements, including major issues regarding accounting
principles and practices as well as the adequacy of internal controls
that could materially impact the Corporation's financial statements;
. review with management and the independent auditor the Corporation's
quarterly financial statements prior to their release which review may
be done by the Committee or its chairperson;
. review, prior to issuance, any financial statements (and any related
filings and press releases) to be issued to the shareholders or the
public which review may be done by the Committee or its chairperson;
. review an analysis prepared by management and the independent auditor of
significant financial reporting issues and judgments made in connection
with the preparation of the Corporation's financial statements; and
. review the material reports to management prepared by the internal
auditing department and management's responses.
Independent Auditor
. recommend to the Board of Directors the appointment of the independent
auditor, which firm is ultimately accountable to the Finance and Audit
Committee and the Board of Directors, which have the ultimate authority
and responsibility to select, evaluate and, where appropriate, replace
the independent auditor;
. evaluate the performance of the independent auditor and, if so
determined by the Finance and Audit Committee, recommend that the Board
of Directors replace the independent auditor;
. approve the fees to be paid to the independent auditor;
. obtain confirmation and assurance as to the independent auditor's
independence, including ensuring that it submits on a periodic basis
(not less than annually) to the Finance and Audit Committee a formal
written statement delineating all relationships between the independent
auditor and the Corporation. The Finance and Audit Committee is
responsible for actively engaging in a dialogue with the independent
auditor with respect to any disclosed relationships or services that may
impact the objectivity and independence of the independent auditor and
for recommending that the Board of Directors take appropriate action in
response to the independent auditor's report to satisfy itself of its
independence.
. review with the independent auditor and management of the Corporation
the proposed scope of the audit for the current year and the audit
procedures to be utilized, and at the conclusion thereof, review such
audit including any comments or recommendations of the independent
auditor;
. review with the independent auditor and with the Corporation's financial
and accounting managers the adequacy and effectiveness of the
Corporation's internal auditing, accounting and financial policies,
procedures and controls;
. elicit any recommendations of the independent auditor for the
improvement of existing internal control procedures or the establishment
of modified, new or additional controls or procedures with emphasis
given to the adequacy of the internal controls to expose any payments,
transactions or procedures which might be deemed illegal or otherwise
improper;
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. discuss with the independent auditor the matters required to be
discussed by Statement on Auditing Standards No. 61, as may be modified
or supplemented, relating to the conduct of the audit;
. review with the independent auditor any problems or difficulties the
independent auditor may have encountered in its audit and any management
letter provided by the independent auditor (the Corporation's response
to said letter) which review should include:
a. any difficulties encountered in the course of the audit work,
including any restrictions on the scope of activities or access to
required information; and
b. any changes from the planned scope of the audit.
. and, meet at least annually with the independent auditor in an executive
session.
Financial Reporting and Internal Audit Process
. review material changes to the Corporation's internal auditing and
accounting principles and practices as suggested by the independent
auditor, the internal audit department or management;
. review any changes in accounting principles before they are implemented
by the Corporation;
. review with the independent auditor and the senior internal audit
executive the proposed scope of the internal audits for the current year
and the audit procedures to be utilized, and at the conclusion of the
year, review such audit, including any comments or recommendations of
the senior internal audit executive;
. review the internal audit department responsibilities, budget and
staffing;
. review the appointment and replacement of the senior internal auditing
executive;
. review the internal audit function of the Corporation (including the
proposed programs for the coming year), the coordination of its programs
with the external auditors and the results of the internal programs;
. meet with management periodically to review the Corporation's major
financial risk exposures and the steps management has taken to monitor
and control such exposures; and,
. meet at least annually with the senior internal audit executive in an
executive session.
Corporate and Legal Compliance
. review and approve the report prepared by management and required by the
rules of the Securities and Exchange Commission to be included in the
Corporation's annual proxy statement.
. obtain such reports from management, the senior internal auditing
executive or the independent auditor that the Committee deems
appropriate that the Corporation's subsidiary entities and foreign
affiliated entities are in conformity with applicable legal requirements
and the Corporation's corporate policies;
. review with the Corporation's General Counsel legal matters that may
have a material impact on the financial statements, the Corporation's
compliance policies and any material reports or inquiries received from
regulators or governmental agencies; and,
. receive and review reports from the Corporation's General Counsel
regarding the results of the Annual Questionnaires on compliance with
law and advise the Board of Directors with respect to the Corporation's
compliance with applicable laws and regulations and with the
Corporation's corporate policies.
While the Finance and Audit Committee has the responsibilities and powers
set forth in this Charter, it is not the duty of the Finance and Audit
Committee to plan or conduct audits or to determine that the
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Corporation's financial statements are complete and accurate and are in
accordance with generally accepted accounting principles. This is the
responsibility of management and the independent auditor. Nor is it the duty of
the Finance and Audit Committee to conduct investigations, to resolve
disagreements, if any, between management and the independent auditor or to
assure compliance with laws and regulations and the Corporation's corporate
policies.
April 2000
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